﻿ An insurance company is offering a new policy to its customers.Typically the policy is bought by a
X

### Question

An insurance company is offering a new policy to its customers.Typically, the policy is bought by a parent or grandparent for achild at the child’s birth. The details of the policy are asfollows: The purchaser (say, the parent) makes the following sixpayments to the insurance company:

First birthday: \$ 760

Second birthday: \$ 760

Third birthday: \$ 860

Fourth birthday: \$ 850

Fifth birthday: \$ 960

Sixth birthday: \$ 950

After the child’s sixth birthday,no more payments are made. When the child reaches age 65, he or shereceives \$260,000. The relevant interest rate is 10 percent for thefirst six years and 7 percent for all subsequent years.

Find the future value of thepayments at the child's 65th birthday: Future Value\$____________

### Solution

xxxxxx:xx xxxx xx find xxx FV xx xxx xxxxxxxx to xxxxxxx with xxx xxxxxxyxxxx xxxxxxxx at xxx 65. xx xxxx xx find xxx value xx xxxxxxxxxxx xx year x first xxxxx xxx xxxxxxxx rate xxxxxxx at xxxxxxxx. xx:&#xxx;&#xxx;

FV1 = \$xxx(x.xx)x= \$x,xxx.xx&#xxx;&#xxx;xxx =\$760(1.10)4 = \$1,112.72

FV3 =\$xxx(x.xx)x = \$x,xxx.xx&#xxx;&#xxx;
 xxx =\$850(1.10)2 = \$x,xxx.xx&#xxx;&#xxx;FV5 =\$xxx(x.xx)x = \$x,xxx.xx xxxxx xx Yxxx 6 = \$1,223.99 +x,xxx.xx + x,xxx.xx + x,xxx.xx + x,xxx.xx + xxxValue xx Year x = \$x,xxx.xx&#xxx;&#xxx; xxxxxxx xxx xx of xxxx lump xxxxx xxx xxxxx&#xxxx;x 65th xxxxxxxy: xxxxxx xxxxx = \$6,515.87(1.07)59 = \$352,870.55.The xxxxxy xx xxx worth xxyxxx; the xxxxxx xxxxx xx the xxxxxxxxxx \$352,870.55, xxx xxx xxxxxy contract xxxx pay xxx \$xxx,xxx. xxxxxxxxxxx are xxxxx \$92,870.55 xxxx xxxx xxx policy xxyxxx. Copyright © 2015. Homeworkping.com HwSolutionOnline is not sponsored or endorsed by any college or university.